Equalizing the Community Risk Cost Benefit Distribution

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The environmental and energy benefits of renewables mainly accrue at a national and international level. The environmental and social direct impacts occur mainly at a local level. This discrepancy can lead to inequitable distribution of costs and benefits if they are not considered carefully.

The destructive impacts of climate change act at a global level, as do the positive impacts of greenhouse gas mitigation via renewable energies. For nations embarking on emissions reduction programmes or which are signatory to the Kyoto Protocol, the benefits of the renewable energy could be said to accrue at a national level. However, localized impacts or lifestyle adjustments will occur at the community level where the renewable projects are hosted. Since these impacts can be both positive and negative, it is important to ensure that local communities get their fair share of the benefits of renewable energy development so that they may consider themselves net beneficiaries.


RECs electricity


Note: RECs: Renewable Energy Credits.

Figure 3.17 Many environmental and social direct impacts of renewable energy projects will be experienced at the local level, although the benefits of ownership and investment may not be offered to the local community

Compelling rationales exist for government to intervene on behalf of the nation and find mechanisms to increase the benefit to local communities. Evidence from successful markets indicates that finding suitable avenues to increase the direct benefits to host communities dramatically increases their acceptance of the projects and willingness to host further renewable energy developments. The following questions and answers could help to guide such outcomes.

Are the local impacts of developing renewable energy projects of this form known and quantified?

The local community impacts may be negligible for renewable installations such as solar photovoltaics or solar hot water heating. However, even these will need factories and raw materials. Where will these factories be built? Where will supplies be sourced? Who will this impact? Other technologies such as wind, geo-thermal and biomass may result in significant disturbance during the construction phases and entail some level of impacts thereafter. As previously mentioned, typical effects might include: visual amenity and changes to the landscape, increased traffic from fuel deliveries, and land use change for energy crops.

The process of identifying all the impacts for the various renewables is reasonably simple and has been done for countless projects, often in the form of environmental impact statements. With this information in hand it is possible to look at how balanced this equation is for host communities and other stakeholders.

Do the policies require that communities and stakeholders are properly informed and consulted, and the potentially negative impacts thereby minimized?

Before considering the possible solutions, it is important to appreciate that the process itself often colours stakeholders' view as to whether an outcome is balanced or not. Three steps that can really assist in this regard are: information, consultation and adaptation.

Providing insufficient information is a classic and repeated failure of governments, industries and non-governmental organizations (NGOs) alike. Renewable energy industry development often starts in an information vacuum. Information is often only developed in response to community or stakeholder concern and it may well be that by the time correct information is made available the vacuum has already been filled with rumours, half-truths, untruths and scandal.

Almost every person on the planet has an innate fear of the unknown. It is an inescapable human characteristic. Renewable energy projects create changes and introduce unknowns. A crucial service that must be performed is to minimize the unknowns through the provision of balanced facts and experience. People feel respected and appreciated if they are kept informed.

Consultation is also crucial. Personal acceptance of imposed change is affected by how much that person or group has been consulted and listened to. This is over and above the degree to which their opinion has prevailed. People understand that most outcomes will require a balance on issues and opinions, but they also feel it important that their voice be heard and acknowledged in the process.

Specialist stakeholders will also provide a valuable source of expertise on environmental and social issues. However, one aspect of consulting such groups is that their resources may be limited and this constraint needs to be accommodated.

Next comes adaptation; consultation should be followed by a process in which opinions, concerns and proposals are considered and projects adapted where necessary. Sometimes requested changes may make little or no impact to a project's viability. On the other hand, more rapid approval can save significant amounts of time and money.

There is considerable merit in the incorporation of formal government or industry policies to ensure that best practice is followed for information, consultation and adaptation. Good renewable energy developers will follow best practice anyway, so for them this will not be an imposition. However, the policy will serve to pick up the more lazy developers and avoid community confrontations that have a damaging effect on the wider renewable energy industry.

Box 3.6 Using television to inform the public about wind energy

What do wind farms look like? Is it better for the public to read an academic argument in the newspapers or see wind farms themselves? In 2003 a television advertisement was screened in various parts of regional Australia on behalf of the AusWEA. The two stated objectives were to demonstrate why renewable energy is needed and to show people what wind farms look like in moving images. While the use of television might not seem to be the most obvious form of public outreach for wind developers, it is an effective way of letting a very influential stakeholder group (the public) see this technology in action. The ad resulted in greater support for the MRET campaign through the Internet, while the television station that aired the ad received calls from the public expressing positive feedback.

Source: Transition Institute (2003)

Figure 3.18 Screenshots of Transition Institute advertisement for the Australian Wind Energy Association

Source: Transition Institute (2003)

Figure 3.18 Screenshots of Transition Institute advertisement for the Australian Wind Energy Association

Have the potential positive impacts for local and regional communities been maximized within the policy framework?

It is important to maximize local benefits to ensure that the positive and negative impacts of a renewable energy development are at the very least balanced, and at best weighted in favour of the local community and stakeholders. Much of this may be up to the project developer, but because we are looking at policy initiatives, we will examine some of the more universal techniques that can be applied.

We need to be very aware that these measures may have some cost impact on renewable energy; if they were the cheapest option they would likely happen anyway. However, policy intervention is necessary to ensure that the measures to maximize local benefit occur, and this can be done in one of two ways: with the carrot or the stick. Whether we use incentives or obligations to achieve the desired outcome depends on which is most efficient in a given situation.

There are numerous potential measures. They include creating import tariffs or tax breaks that provide an incentive for local manufacture, or requiring specified levels of local content or spending in planning approvals. Incentives can also be provided to maximize the amount of locally spent capital investment. Provision of incentives or investment is also possible for re-training and company start-up to maximize the amount of installation, operation and maintenance spent locally. Measures may also include mechanisms for local ownership, and incentives that increase benefits for local investors over non-local investors.

We will consider local employment and local ownership in a little more detail as we answer the next two questions.

Does the policy framework provide incentives for local employment content?

For every person directly employed by a company, typically another two are indirectly employed. Employment creation can have a dramatic impact on small local economies.

Renewable energy sources are especially labour intensive. Leveraging job creation at a local level significantly increases the actual positive social impact of projects. Many of the policies and measures discussed above contribute towards this outcome. However, additional incentives can be put in place.

Renewable development can create employment in project development, engineering and consulting, construction, installation, fuel collection, and operation and maintenance. In fact, employment in some of these job categories can be very significant. For example, a 1.5MW wind farm may require spending of about US$25,000 per year for operation and maintenance (a 50MW wind farm $750,000 per year) and much of this employment can be provided locally.

India has used import tariffs very successfully to maximize local manufacture of content for renewable energy production. Moreover, the government has struck a clever balance between stimulating Indian content without increasing prices. In 2001, I led a team to Gujarat, India following a major earthquake there, to install emergency stand-alone power equipment in schools and hostels. We sourced as much as possible from local companies. One such company explained that they were able to import from overseas individual solar cells with little tariff impost, as these components were not manufactured in India. These cells were then used to locally assemble the complete solar panels. Whole solar panels, on the other hand, had a significant import duty since this local manufacture was possible. This policy clearly provides an incentive and advantage to locally assembled products.

Techniques such as these provide incentives without burdening government or taxpayers. Indeed stimulating economic activity and employment will have a net positive effect for government in most instances.

Are there policies that provide means and incentives for local ownership?

There is strong evidence that local financial ownership can have a dramatic effect on acceptance. The Danish have had particular success linking tax benefits for renewable energy investment to geographical proximity of projects. Local people are thereby singled out for special benefits from a nearby project, as the following quote from Dambourg and Krohn (1998) shows:

In Denmark 80 per cent of erected turbines are owned by individuals or cooperatives. More than 150,000families have shares in wind energy schemes. The connection between ownership and social acceptance is set out by Krohn (1998).

The highest concentration of wind turbines in the world occurs in a place calledSydthy, Denmark. Sydthy has 12,000 inhabitants and98per cent equivalent of its power comes from wind power. The reason that the community accepts and allows so much wind development may be explained by a poll by Andersen et al (1997), that reveals that 58 per cent of the households in the municipality of Sydthy have one or more shares in cooperatively owned wind turbines.

The Danish Wind Industry Association overview of international public surveys states, 'In Denmark there is a tradition for wind co-operatives, where a group of people share a wind power plant... Regarding the general attitude towards wind turbines, the picture is clear. People who own shares in a turbine are significantly more positive about wind power than people having no economic interest in the subject.'

In the early days of Danish wind development, wind turbines were smaller and therefore within the financial reach of farmers and co-operatives. As new renewable projects start to increase in size and value to well over $50 million, they are beyond the grasp of the home-spun owner or collective. In new markets this presents a novel challenge.

Intervention will be required to create the means for local ownership in these larger renewable energy projects. This intervention is necessary because, first, the scale makes the contribution of individuals minor; second, there is no shortage of global investment capital meaning local investment is not required; and finally because the cost of servicing many small investors is greater than the cost of dealing with a single large institutional investor.

While it is beyond the scope of discussions here to explore policy intervention capable of solving this ownership hurdle,8 examples do exist. One is the Middle-

grun offshore wind project near Copenhagen, a development that is 50 per cent utility owned and 50 per cent shareholder owned.

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Renewable Energy Eco Friendly

Renewable Energy Eco Friendly

Renewable energy is energy that is generated from sunlight, rain, tides, geothermal heat and wind. These sources are naturally and constantly replenished, which is why they are deemed as renewable.

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